Which type of risk can lead to volatility in a company's stock price related to its sector?

The volatility in a company's stock price related to its sector is best explained by comparative industry risk. This type of risk reflects the inherent characteristics and challenges that are shared among companies operating within the same industry. Factors such as regulatory changes, market demand fluctuations, and economic conditions that specifically affect an entire sector can cause stock prices to move in tandem.

For instance, if there is a sudden downturn in technology spending, all companies in the tech sector might experience declines in their stock prices, regardless of their individual financial health. This sector-wide risk contributes to the overall volatility seen in stock prices of companies that are comparably situated within the same industry.

The other options, such as interest income, company size premium, and option pricing method, are not directly related to the volatility stemming from sector-specific risks. Interest income pertains to the returns from investments rather than market fluctuations. The company size premium relates to the additional returns associated with investing in small-cap companies compared to larger ones, but it does not capture sector-wide volatility. Finally, the option pricing method is a valuation technique used for pricing options, rather than an identifier of risks affecting stock price volatility across an industry.